Saturday, May 10, 2008

HONG Kong's stock exchange said yesterday it will allow foreign companies to list shares through depository receipts for the first time starting in July, aiming to draw more business from abroad.

The market said in a statement the launch of Hong Kong depository receipts, or HDRs, is targeted at foreign firms whose local regulators don't allow them to list shares directly on overseas stock exchanges.

The South China Morning Post reported yesterday the plan also comes as the Hong Kong market faces increasing competition from the mainland stock markets.

"The depository receipt scheme will diversify the source of listed companies in Hong Kong and strengthen our position as an international financial center," the English-language newspaper quoted Hong Kong Stock Exchange Chairman Ronald Arculli as saying.

Arculli said the plan will likely draw companies from Russia, Vietnam, India, Kazakhstan and the Middle East, according to the report.

HDRs will work in a similar way to American Depository Receipts, the newspaper reported.

ADRs represent shares of foreign companies traded on United States markets that allow American investors to get exposure to foreign stocks without actually investing in overseas markets. ADRs are issued by US banks that hold a receipt of the foreign company's shares in their vaults.